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Psychological Contract

a vital ingredient for performance

The Psychological Contract

The concept of the Psychological Contract (described as the Contract) emerged in the early 1960’s and has gained greater interest since because of the demands and pressures placed on employees as a consequence of general economic concerns.

The Contract is an unwritten set of mutual, and often implicit, obligations between employers and employees, based on a personal perception of fairness and reasonableness. As such it isn’t a conventional contract, but the impact of having a Psychological Contract is often more powerful than anything that is written.

The Contract influences the behaviour of employees towards employers, based on the manner in which the employer behaves towards employees. Employees who feel they are fairly treated at work have attitudes that assist their resilience against adverse and challenging events and behaviours that may occur in the workplace.

In an environment that is challenging because of the economic situation, triggering reactive organisational actions such as initiating mergers, acquisitions, changing terms and conditions and downsizing, results in employees being less favourably disposed towards employers when they are perceived as not being treated fairly and reasonably during such processes. When this happens the Contract is breached and employees become disengaged and performance is impaired.

The fluid and ambiguous nature of the Contract places leaders and managers in some difficulty in understanding what is fair and reasonable.

This is especially true in situations where the organisation may be under threat and needs to take rapid action to secure continued survival and prosperity. The rapid action may use behaviours that are perceived by others as being unfair and unreasonable, for example, not explaining why certain decisions have to be made. Leaders and managers may believe their actions to save jobs may be sufficient to demand the engagement of the workforce. This may be the case, but the degree of engagement moves closer to being superficial, resulting in lowering of performance.

Performance relies on individuals being able to concentrate on the tasks they want, or are expected, to perform. This requires individuals to feel in mental control of themselves. Anything that distracts them from being in mental control, feeling uncertain for example, will result in a diminution of performance. So, feeling that someone or something is unfair and/or unreasonable will have a direct impact on performance.

Employment is a relationship between employer and employee, not unlike a marriage, but with a different origin and purpose. There is a formal contract outlining the nature of the relationship, but it is the way in which the parties behave towards each other that determines how much effort is put into making the relationship thrive and prosper or simply exist. It is the relationship, or Psychological Contract, between the parties that is important; more important than the formal contract. The formal contract is often perceived as confirming the relationship, not the relationship confirming the contract. However, the formal contract does assume certain implicit obligations and expectations about the relationship, and it is these that lie behind the notion of the Psychological Contract.

The question arises as to how to limit the risk of fracturing the fluid and ambiguous Contract. Once fractured, performance deteriorates and costs rise, yet knowing and understanding when and how such a fracture occurs is fraught with uncertainty and ambiguity, and can be bewildering to leaders and managers when such fractures occur.

The fracture of the Contract may not be obvious.

Employees may continue working, but the amount of mental energy put into their work will be less, resulting in lower performance. The process of lowering performance may be gradual, and only become obvious when productivity is lower over an extensive period of time.

The Psychological Contract is an unwritten set of obligations that influence how people behave towards each other. As they are implicit, it is relatively easy for the Contract to become fractured leading to under performance.

By making explicit the obligations that lead organisations to high performance and future success it is possible to reduce the risks of fracturing the Psychological Contract. This enables organisations sustain psychological wellbeing in the workforce and achieve consistently high performance.

Creating the conditions for sustainable Psychological Contracts

You start by identifying what the majority of people look for to feel psychological well and motivated at work.

If you feel psychologically well, in control of yourself mentally, you perform tasks and deal with challenges more successfully than if you feel unwell, or out of mental control. The behaviours that help are shown in the image.

They are the behaviours that reduce the risk of challenging events and adverse behaviours occurring that may trigger stressful reactions in people, the kind of events that cause people to lose mental control; a lack of trust, for example.

Social engagement is characterised in this context by vigour, dedication and absorption in activities and the organisation that generates them. It has similar characteristics to psychological flow, the term used to describe people who experience a buzz and become energised and absorbed by what they are doing, something more easily recognised in those who enjoy participating in a sport. In the workplace, those who are absorbed by their work experience the buzz that makes you feel terrific.

The attributes and behaviours that lead to social engagement are:

  • Commitment - which is a promise to do something. It has variable degrees of intensity, but commitment to the organisation and its future success is a key attribute and behaviour that helps individuals achieve social engagement.
  • Trust - is the absence of second guessing the motivation of others. Where trust exists, you take at face value what others say and do without needing to think about their motivations for doing so. Often, when thinking about the motivation of others, you start being sceptical and unsure, and this can dilute your trust and your commitment.
  • Motivation - is the marriage between you being open to being enticed to do something, and something enticing you to do it. This marriage provides the stimulus to be aroused to be energised to do something. The workplace, therefore, needs to entice you; but you need to be open to be enticed. If there is a lack of trust, your interest in being enticed is diminished, as you’ll wonder if the enticement of the workplace is real or superficial, and the opportunity to be socially engaged will be compromised.
  • Kinship - provides a strong sense of attachment; of belonging. This is similar to corporate citizenship, but emphasises the intelligent kindness that is a feature of kinship. You share everything – the successes, failures, ideas and mistakes. You show empathy with others when things go wrong, and offer your support to put things right. You feel a sense of pride at being part of a kinship organisation, and will have an affinity with others in the same organisation as you all belong together, seeking to achieve success for the organisation. This provides you with a ‘feel good’ sensation that helps strengthen your social engagement with your work and the organisation.
  • Concentration – is your capacity to focus attention on undertaking a task for sufficient time to complete it successfully, without your mind being hijacked by other events or behaviours. In the workplace this means being able to complete bite sized tasks without repetition, deviation or hesitation. Success is a key aspect of feeling psychologically well, as the sensation of being successful is something you get a buzz from and wish to repeat.

These attributes and behaviours provide a solid basis for a sustained Psychological Contract between the employee and employer. They help to form a strong bond between the parties; a bond that is the essence of a strong relationship.

Achieving the implementation of these attributes and behaviours across an organisation requires a systematic approach. They don’t happen by chance.

The WellBeing and Performance Agenda

The WellBeing and Performance Agenda is a framework designed to help organisations achieve strong psychological wellbeing, which in turn, provides the conditions in which individuals can thrive and perform at their peak consistently. This can only be achieved when the Contract is strong.

You may like to review the WellBeing and Performance Agenda using the diagram below as a navigation link:

A Fabulous Organisation

PEAK PERFORMING

PSYCHOLOGICALLY
HEALTHY

RESILIENT

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